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It’s a balancing exercise

A trustee in bankruptcy applied for an order for sale of a property owned jointly by the bankrupt and his wife, the claimant. The claimant, who suffered chronic ill health, resided in the property. She also jointly owned another property with her brother, and in order to suspend orders for possession and sale of the matrimonial property, offered charges over that other property. This was not accepted by the trustee on the basis that the husband’s creditors would be unlikely to receive payment in the near future. The judge refused to make such an order as he considered he had no jurisdiction to do so. The circumstances of the case were, however, held to be exceptional within s335A (3) Insolvency Act, and it was further ordered that the property should be put on the market not earlier than 18 months following the order. The claimant argued that the judge had not approached the balancing exercise correctly as he had given too much weight to the interests of unidentified creditors.

On appeal the court held that the judge did in fact have jurisdiction to make an order in relation to the second property, had he wanted to. But, as he had exercised his discretion correctly regarding the balancing exercise, the order would stand. The court had to decide what was just and equitable, which included taking the creditors’ interest into account. The need for a home had to be considered, but this was not an absolute objective to be guaranteed in every case. It was simply another consideration in the balancing exercise.

The court gave no weight to the argument that creditors were not specifically identified. It accepted that a trustee would always be appearing on behalf of the bankrupt estate (behind which would stand the interests of all and any bankruptcy creditors).

Nicholls (By her litigation friend the official solicitor) v Lan (Trustee in Bankruptcy of the estate of B Nicholls) and B Nicholls